DCIT, CHENNAI V. Helios and Matheson Information Technology Limited, CHENNAI

ITA 1670/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4529 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 14-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 06-06-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Earning of tax free income; Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , '.. % , * BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.1669 & 1670/MDS/2016 + + /ASSESSMENT YEARS: 2008-09 & 2011-12 THE THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), ROOM NO.512, 5 TH FLOOR, WANAPARTHY BLOCK, 121, M.G.ROAD, CHENNAI-600 034. VS. M/S.HELLOS AND MATHESON INFORMATION TECHNOLOGY LTD., NO.9, ADWAVE TOWERS, SOUTH BOAG ROAD, T. NAGAR, CHENNAI-600 017. [PAN: AAACE 0805 A ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.SUPRIYO PAL, JCIT /0. 1 /RESPONDENT BY : MR.R.VIJAYARAGHAVAN, ADV. 1 /DATE OF HEARING : 14.03.2017 1 /DATE OF PRONOUNCEMENT : 26.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 18.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) -6, CHENNAI, IN ITA NO.180/CIT(A)-6/2014-15 FOR THE AY 2008-09 & ITA NO .182/CIT(A)- 6/2014-15 FOR THE AY 2011-12 AND RAISED THE FOLLOWI NG GROUNDS: ITA NOS.1169 & 1670/MDS/2016 :- 2 -: 2.0 BOTH THE APPEALS ARE ON THE COMMON ISSUE OF DIS ALLOWANCE MADE U/S.14A OF INCOME TAX ACT (IN SHORT THE ACT). DU RING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS REC EIVED THE DIVIDEND INCOME OF RS.64,73,573/- AND THE SAME WAS CLAIMED A S EXEMPT IN THE COMPUTATION OF INCOME. THE AO APPLIED RULE 8D OF I NCOME TAX RULES AND MADE THE DISALLOWANCE OF RS.1,33,73,209/- FOR THE A Y 2008-09 AND RS.1,85,57,722/- FOR THE AY 2010-11. THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO PLACING RELIANCE ON THE DECISION OF THE THIS TR IBUNAL IN ASSESSEES OWN CASE FOR THE AY 2006-07, 2008-09, 2009-10 & 2010-11 IN ITA NOS.2027, 2028, 2029 & 2030/MDS/2014. 3.0 APPEARING FOR THE REVENUE, THE LD.DR RELIED ON THE ORDERS OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD.AR RE LIED ON THE DECISIONS OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE CITED (SUPRA) AND THE ORDER OF THE LD. CIT(A). THE ITAT D BENCH OF THIS TRIBUNAL IN THE ORDER CITED (SUPRA) HELD ON THE SAME FACTS THAT THE PROVISIONS OF SEC.1 4A WOULD NOT BE APPLICABLE FOR THE AY 2006-07 & 2008-09 2009-10 & 2 010-11IN THE ASSESSEES OWN CASE. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PART IN PARA NO. 9 OF THE ITAT ORDER IS REPRODUCED AS UNDER : 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SECTION 14A OF THE AC T PROVIDES FOR DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING TH E INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. RULE 8D OF THE INCOME-TAX RULES, 1962 PROVIDES FOR METHOD OF COMPUTATION FOR DISALLOWANCE. THE CIT(APPEALS), AFTER CONSIDERI NG THE MATERIAL AVAILABLE ON RECORD AND THE INVESTMENT MADE BY THE ASSESSEE, DIRECTED THE A SSESSING OFFICER TO CONSIDER THE DISALLOWANCE OF RS.24,39,220/- AND RS.35,43,108/- F OR THE ASSESSMENT YEARS 2009-10 AND 2010-11 RESPECTIVELY AGAINST RS.1,20,90,107/- AND R S.1,83,22,970/- DISALLOWED BY THE ASSESSING OFFICER IN HIS ORDER. THE BALANCE DISALLOW ANCE OF RS.96,50,887/- AND RS.1,47,79,862/- WERE DELETED. IN FACT, THE CIT(APP EALS) APPLIED THE PROVISIONS OF RULE 8D FOR COMPUTING THE DISALLOWANCE FOR THE ASSESSMENT Y EARS 2009-10 AND 2010-11. FOR THE ASSESSMENT YEARS 2006-07 AND 2008-09, THE INVESTMEN TS WERE MADE IN 100% FOREIGN ITA NOS.1169 & 1670/MDS/2016 :- 3 -: SUBSIDIARY COMPANIES. NO FRESH INVESTMENT HAD BEEN MADE IN THE FINANCIAL YEARS 2008-09 AND 2009-10. SINCE THE INVESTMENT WAS MADE IN THE S UBSIDIARY COMPANIES IN THE FORM OF EQUITY, THE CIT(APPEALS) FOUND THAT SUCH INVESTMENT IS OUTSIDE THE SCOPE OF SECTION 14A OF THE ACT. WHEN THE ASSESSEE INVESTED THE FUNDS IN SU BSIDIARY COMPANIES, AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE I NTENTION IS NOT FOR EARNING THE EXEMPT INCOME BUT BECAUSE OF COMMERCIAL EXPEDIENCY. THEREF ORE, AS RIGHTLY FOUND BY THE CIT(APPEALS), THE PROVISIONS OF SECTION 14A WOULD N OT BE APPLICABLE FOR THE ASSESSMENT YEAR 2006-07 AND 2008-09. IN VIEW OF THIS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS) AND ACCORDINGLY, THE SAME IS CONFIR MED. THE LD.AR SUBMITTED THAT NO FRESH INVESTMENT WAS M ADE IN THE ASSESSMENT YEARS UNDER CONSIDERATION. THE ASSESSEE CONTINUED THE INVESTMENTS IN THE SUBSIDIARY COMPANIES MADE IN EAR LIER YEARS. THERE WAS NO CHANGE IN THE FACTS OF THE CASE COMPARED WITH TH E FACTS OF THE ASSESSMENT YEARS 2006-07, 2010-11 ON WHICH FACTS TH E ITAT HAS CONFIRMED THE ORDER OF THE LD.CIT(A). THE LD. DR D ID NOT CONTROVERT THE FACTS AND DID NOT PLACE ANY DECISION CONTROVERTING THE ABOVE DECISION. THEREFORE, FOLLOWING THE ORDER OF THE ITAT WE HOLD THAT THE PROVISIONS OF SEC.14A WOULD NOT BE APPLICABLE FOR THE AYS 2008-09 & 2011-12 ALSO. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD.CIT(A) A ND DISMISS THE APPEAL OF THE REVENUE. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' . . % ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: 26 TH MAY, 2017. TLN ITA NOS.1169 & 1670/MDS/2016 :- 4 -: 1 /%7 87 /COPY TO: 1. . /APPELLANT 4. 9 /CIT 2. /0. /RESPONDENT 5. 7 / /DR 3. 9 ( ) /CIT(A) 6. + /GF